SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Thu, Nov 22, 2012
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I still think that at the November 16 low the determining factors that usually "accompany" a major bottom were not fulfilled, I am referring to positive divergences of momentum & breadth indicators and a spike of "fear", therefore I maintain the scenario that calls for a pending "last" wave down.

Tomorrow probably it will be an uneventful day (1/2 trading day) hence the critical battle will take place next week.

The target box is shrinking, now the range is between the 20 dma = 1394.37 and the October 26 low = 1403.28 which also coincides with the trend line resistance off the October 2011 lows.

As for support a decline back below the 200 dma = 1382.92 will be the first step that should announce the end of the "oversold" rebound, while an eod print below 1377 should seal the deal.

SPX Daily Chart
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Regarding the EWP off the November 16 low, in my opinion, price is unfolding a TZZ; maybe a thrust out of a potential triangle could establish the top of the wave (Z).

If the Triangle idea plays out then the 1 x 1 extension target is at 1402.80.

SPX 20-Minute Chart
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If price is approaching the top of the assumed wave (B), the negative divergence that is already appearing in the NYSE Adv-Dec Volume should be maintained.

NYSE Advance/Decline Volume

I will be watching two VIX etf:

1. XIV:

The price action is questioning my short-term bearish scenario.

It has established a marginal higher high. The thrust could be justified by a completed Leading Diagonal wave (A). Two consecutive candlesticks above the Bollinger Band are suggesting that the move is a "bit" extended. But if my scenario is the correct one XIV has to reverse quickly to the down side, maybe unfolding a Flat.

XIV Daily Chart
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2. VXX:

The forceful sell off from the November 15 peak could be the final thrust out of a large Triangle.

VXX Daily Chart
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And I will also keep a close attention to the Bund, since if the equity indices are approaching a top the Bund should be approaching a bottom. The 141.95 area would be a nice spot for a reversal.

Bund Daily Chart
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Enjoy the weekend.




Author: TheWaveTrading


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